Thursday 18 July 2019

Kingdom come: new opportunities for Irish firms in Saudi

Saudi Arabia's capital, Riyadh. Photo: Bloomberg
Saudi Arabia's capital, Riyadh. Photo: Bloomberg

Mike Hogan

Saudi Arabia remains the single largest market for the Irish exporters in the Middle East, despite the slowdown in the Saudi economy wrought by low oil prices.

Enterprise Ireland client companies have key positions in healthcare, agricultural and food technology, ICT and education. In education alone, nearly 2,000 Saudi students study in Ireland at third level. Likewise, for Irish technology developers, there are significant opportunities as Saudi companies have limited access to indigenous ICT solutions.

While maintaining and evolving this export portfolio, Ireland should look to demographics as the driver of the next wave of Irish exports to Saudi Arabia. The challenge will be to develop new offerings for a changing, youth-orientated population.

Companies looking to the Kingdom need to look beyond the fact that the petroleum sector accounts for 45pc of Saudi's GDP. Instead, they should look at its people. Over the past decades, Saudi Arabia has experienced a massive population surge. In 1980, the population was just under 10 million. Today it numbers some 31.5 million, and it is expected to grow to 40 million by 2030. Over half the population is under 25, and approximately 33pc are foreign workers, ranging from well-paid professional expats to manual labourers from South Asia.

More people in Saudi Arabia means demand for more infrastructure and more jobs. Despite the impact of lower oil prices, Saudi Arabia has dug into its reserves and commenced the privatisation of Saudi Aramco, its national oil company. The objective is to fund an ambitious programme of economic realignment called Vision 2030, championed by new Crown Prince Mohammed bin Salman.

The programme envisages a reorientation of the economy towards petrochemicals, tourism, sustainable energy, logistics, education and training, and the capital is being put in place to make it happen.

In parallel, the government policy of Saudisation will make it less attractive for local companies to hire foreign labour and make the increased employment of Saudi citizens mandatory. This includes the female population, which is greatly under-represented in the workforce due to religious restrictions and social mores.

There are challenges; changes in Saudi rules last year have made visas very expensive (up to €700 each) for Irish companies. In addition, low oil prices have seen delays in payment for some exporters. But regardless, Saudi Arabia is poised to appear on the export radar of a new generation of Irish companies. Every month, various arms of the Saudi state announce new and more ambitious projects, with tourism and leisure taking central stage.

Entertainment City, the kingdom's largest cultural, sports and entertainment centre, is to be built over a 334 sq km area, southwest of the capital, Riyadh. The project includes a safari park and an anchor Six Flags theme park.

This July will see the launch of a plan to turn 50 islands along the Red Sea into a global tourism destination. Occupying an area the size of Belgium, the development will include access to the ancient Nabataean ruins of Mada'in Saleh, the same civilisation that built Petra in Jordan. Both projects are due to be completed by 2022.

To facilitate much of this tourism and leisure development, the government is relaxing rules on entertainment. Over the past year, concerts, dance shows and film screening have reappeared in Saudi for the first time in over 30 years, with the aim of growing this sector to over 6pc of GDP. This is a clear play to get a slice of the burgeoning Muslim tourism market, while simultaneously providing work opportunities of the growing Saudi population.

Ireland is well placed to ride the new wave of Saudi change, with clear opportunities in the delivery of physical infrastructure for transport and energy and solutions in the cleantech, travel, leisure and logistics fields.

Mike Hogan is regional manager of Enterprise Ireland - Middle East and North Africa.

Sunday Indo Business

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